Advantages of Group Health Insurance over Individual Health
Group health insurance offers certain advantages over individual health insurance policies. The waiting period for preexisting conditions is six months, not one year as with individual policies. Also, if you have been previously insured under a group policy without a break in coverage of more than 180 days, your new insurance company must apply the prior creditable coverage toward the six-month waiting period for preexisting conditions.
Large employer group health insurance (more than 50 employees) and association group health insurance, like individual health insurance, is subject to medical underwriting. You can be denied coverage based on your medical history.
Medical underwriting rules for small group health insurance (2-50 employees) differs from large group and individual health insurance policies. Regardless of any preexisting condition, you must be offered coverage under a small group policy on a guaranteed issue basis. However, the small group insurance company can utilize the six-month waiting period for preexisting conditions. Of course, if you have prior creditable coverage it must be applied to decrease or eliminate the waiting period.
Business Insurance or Group Health Versus Individual Health
Important Points to Remember About Individual and Group Health Insurance Coverage:
- Individual and large group policies are subject to medical underwriting.
- Qualifying creditable coverage must be applied towards the year waiting period for preexisting conditions in individual policies and towards the six-month waiting period for preexisting conditions in group policies.
- Small group policies require that coverage be offered on a guaranteed issue basis regardless of any preexisting condition.
Guaranteed Health Insurance Coverage for Small Groups
California Small Group Law AB1672
- Who's affected: Small employers in California, defined as businesses with 2 to 50 employees. (Technically the law applies not to employers themselves, but to the insurance carriers that sell small group health coverage).
- What it does: If you are a small employer in California with 2 to 50 employees, an insurer cannot deny you group medical coverage based on the health status of your employees, and premiums can only be slightly higher than average if employees have health problems.
The AB1672 law main provisions are:
- Guaranteed issue and renewal of small group policies
- Rules on small group rates
- Limitations on pre-existing condition exclusions
- Requirements that the policies and health care plans and also brokers provide fair information about all products
- The requirements apply whenever an employer pays directly for any portion, however small, of an employee's coverage.
Guaranteed Issue and Renewal
Every small employer has the right to buy any health insurance "product" sold by a health plan to small employers. Think of a "product" as a package containing a list of benefits (what's covered) and a type of service delivery (for example, HMO or PPO). This is what's known as "guaranteed issue."
"Guaranteed renewal" means that a health plan may not cancel a small group's coverage just because one or more enrollees got very sick and generated high health plan costs. A plan may cancel coverage for fraud or failure to pay premiums only.
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